ARK Investment Management bought DraftKings stock as it slid
Posted: November 6, 2022, 6:27 a.m.
Last update: November 6, 2022, 6:27 a.m.
Cathie Wood’s ARK Investment Management increased its previously established stake in DraftKings (NASDAQ:DKNG) significantly, with the stock suffering its worst intraday loss on record last Friday.
Shares of the sports betting operator plunged 27.82% on volume that was more than triple the daily average on Friday November 4 after the Boston-based company published a cautious forecast for 2023, including a larger-than-expected earnings before interest, tax, depreciation and amortization (EBITDA) loss. DraftKings forecasts an EBITDA loss of $475 million to $575 million next year, much worse than the consensus estimate of $426 million.
The operator said it could be profitable based on EBITDA in the fourth quarter of 2023, but that wasn’t enough for investors who are tired of waiting for the game to lose money. DraftKings’ inability to turn a profit looks even worse after rival FanDuel was profitable in the second quarter and rivals such as BetMGM and Caesars Sportsbook are poised to make money.
Unfazed, ARK Invest bought more than 1.6 million shares of DraftKings last Friday, even as the year-to-date loss soared north of 58%.
ARK is going big on DraftKings
ARK, long a backer of DraftKings, spread its Nov. 4 stock purchases across three of its exchange-traded funds with 1.36 million acquired shares added to the ARK Innovation ETF (NYSEARCA:ARKK) – the fund traded on the company’s flagship exchange (ETF).
Another 228,186 added to ARK Next-Gen Internet ETF (NYSEARCA:ARKW) while 87,907 shares were directed to the ARK Fintech Innovation ETF (NYSEARCA: ARKF).
That said, it led to a larger-than-expected Adjusted EBITDA loss for FY2023. With plans to launch its platform in Maryland, Ohio, Massachusetts, and Puerto Rico, DraftKings looks well positioned. to gain market share in a rapidly growing market,” according to a note from the ETF issuer. “DraftKings offers a suite of mobile consumer entertainment services in Sports Betting, Fantasy Sports, iGaming, Sports Media and NFT/Collectables.”
At the end of the third quarter, Wood’s ARK Invest was the second largest institutional owner of DraftKings stock, behind fund giant Vanguard.
ARK Big on Betting Stocks
DraftKings is the 16e– the largest portfolio of the aforementioned ARK Innovation ETF, the company’s flagship fund. The stock is the eighth largest component of the ARK Next Generation Internet ETF.
The internet fund also has exposure to sports betting data provider Genius Sports (NYSE:GENI) and Endeavor Group Holdings, Inc. (NYSE:EDR), which is the owner of OpenBet sports betting business. As for DraftKings, perhaps the best short-term element of the equation is an industry-wide reduction in promotional spend.
“The 3Q22 results further confirm an industry-wide streamlining in the promotional environment, where incumbent industry leaders are collectively reducing promotional/marketing intensity as smaller operators decline,” Roth Capital analyst Edward Engel wrote in a statement to clients.